Remote area housing: reduction of taxable value - remote area housing loan interest

Is the employer entitled to claim a 50% reduction in the taxable value of the expense payment fringe benefit, as it relates to interest in respect of a remote area housing loan, pursuant to subsection 60(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Yes, because the expense payment fringe benefit is a reimbursement of the employee's interest incurred in relation to the employee's remote area housing loan.

The employee owns land on which there is a house. The employee lives in the house which is his or her usual place of residence.

The employee has a housing loan with a bank. The loan was entered into to enable the employee to purchase the land and house.

The employee is a current employee of the employer. The dwelling is situated in a remote area. The employee works in a remote area. In the employer's industry it is customary to provide housing assistance to employees.

The loan is a remote area housing loan connected with a dwelling as required by paragraph 60(2)(b) and subsection 142(1) of the FBTAA.

The employee incurs $5,000 interest in relation to the housing loan. The employer reimburses the full amount of the $5,000 interest expense incurred. This reimbursement is an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA.

There is no recipients contribution made by the employee to the employer.

Paragraph 60(2)(d) of the FBTAA is about not allowing non-arm's length arrangements or arrangements entered into for the purposes of obtaining the tax concessions available under section 60. Paragraph 60(2)(d) does not apply to this arrangement.

The facts as above continue to apply with the following exception.

Instead of the employer reimbursing the full amount of the $5,000 interest expense incurred, the employer only reimburses (in part), half of the $5,000 interest expense incurred. This reimbursement, $2,500, is an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA.

The recipient of the $5,000 (or $2,500) expense payment fringe benefit is the employee of the employer. Paragraph 60(2)(a) of the FBTAA is satisfied.

Recipients expenditure, as defined in section 136(1) of the FBTAA means, in relation to an expense payment benefit, the expenditure incurred by the recipient as described in paragraph 20(b) of the FBTAA.

The expenditure incurred by the recipient as described in 20(b) of the FBTAA is the amount of the interest expense incurred by the employee, $5,000.

The loan is a remote area housing loan connected with a dwelling as required by paragraph 60(2)(b) and subsection 142(1) of the FBTAA.

Accordingly, the $5,000 interest expense is recipients expenditure which is in respect of a remote area housing loan connected with a dwelling. Paragraph 60(2)(b) of the FBTAA is satisfied.

The employee lives in the dwelling as his or her usual place of residence. Paragraph 60(2)(c) of the FBTAA is satisfied.

Paragraph 60(2)(d) of the FBTAA does not apply.

Subsection 60(2) of the FBTAA is satisfied. Accordingly, the employer is entitled to a 50% reduction of the taxable value of the expense payment fringe benefit.

Based on the facts (and alternative facts) contained above, the reduction in taxable value of the expense payment fringe benefit would be calculated as follows: $(facts) $(alternative facts) Expense payment fringe benefit 5,000 2,500 Less 'recipients contribution' nil nil Taxable value before reduction 5,000 2,500 Less subsection 60(2) reduction, 50% of taxable value, (50% x $5,000 or 2,500) 2,500 1,250 Reduced taxable value 2,500 1,250

$(facts) | $(alternative facts)

Expense payment fringe benefit | 5,000 | 2,500

Less 'recipients contribution' | nil | nil

Taxable value before reduction | 5,000 | 2,500

Less subsection 60(2) reduction, 50% of taxable value, (50% x $5,000 or 2,500) | 2,500 | 1,250

Reduced taxable value | 2,500 | 1,250

Date of Amendment Part Comment 25 January 2019 Reasons for Decision Delete unnecessary single quotation mark. 27 May 2016 Facts, Reason for Decision Minor punctuation amendments

Date of Amendment | Part | Comment

25 January 2019 | Reasons for Decision | Delete unnecessary single quotation mark.

27 May 2016 | Facts, Reason for Decision | Minor punctuation amendments